Which ONE of the Following Statements About Working Capital Tradeoff

question 1

Multiple Choice

Which ONE of the following statements about working capital tradeoff is true?

• A) Financial managers need to balance shortage costs against carrying costs to find an optimal strategy.
• B) If carrying costs are larger than shortage costs, then the firm will maximize value by adopting a more restrictive strategy.
• C) If shortage costs dominate carrying costs, the firm will need to move toward a more flexible policy.
• D) All of the above

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Definitions:

Punitive Damages

Financial compensation awarded in lawsuits, exceeding simple compensation and designed to punish the wrongdoing party.

Disability Benefits

Financial assistance provided to individuals who cannot work because of a disabling medical condition.

Employment-At-Will Rule

The legal doctrine that an employment relationship can be ended by either the employer or the employee at any time without cause.

Employee-Employer Relationship

The formal association between an employer and their employee, characterized by the employer's control and the employee's submission to work for pay.